The Purchasing Managers' Index survey for August released yesterday by HSBC Vietnam signalled a near stabilisation in the country's manufacturing sector.— Photo stox

HA NOI (Buz Hub)—The Purchasing Managers' Index survey for August released yesterday by HSBC Vietnam signalled a near stabilisation in the country's manufacturing sector.

"Although output and new orders continued to fall, they did so at marginal rates," the report said.

"There was a survey record increase in employment as manufacturers signalled positive expectations for activity."

Profitability remained under pressure, however, as output charges were little changed but prices rose at the sharpest pace since March. Rising transportation costs were widely reported.

The headline seasonally adjusted PMI recorded 49.4 in August, an improvement on July's 48.5 and the best reading since April but, by remaining below the 50.0 no-change mark, signalled a marginal deterioration in operating conditions.

New orders received by Viet Nam's manufacturers continued to fall in August, extending the current run of contraction to four months.

Market activity remained slow, according to respondents, and customer demand, soft. But there were reportedly pockets of growth, meaning new work only contracted marginally.

New export orders also continued to decline, falling marginally for a third successive month. Export market conditions remained tough but showed signs of stabilising.

Manufacturing volumes fell for a fourth straight month in August as new orders declined. But, in line with the sales trend, the degree to wich output fell was modest.

Manufacturers were again able to make inroads into their backlog during the latest survey period, causing it to fall for the 17th successive month and again at a marked pace.

This also reflected a depletion of inventories. Warehouse stocks fell marginally for the first time in three months. Additional capacity also helped companies to keep on top of workloads.

Employment rose for the first time since April, with the rate of growth the sharpest in the survey history, reflecting the positive forecasts for production and orders.

Profits came under further pressure, reflective of two factors: Prices changed little due to competitive pressures, efforts to stimulate sales, and client requests for reduced prices but costs rose at a marked and accelerated pace.

Inflation was driven also by a rise in the price of oil and associated derivatives.

Commenting on the survey, Trinh Nguyen, Asia Economist at HSBC, said: "Viet Nam manufacturing activity continues to be hammered by weak external demand and sluggish domestic conditions, though the pace of contraction is significantly reduced.

"Global demand is expected to pick up towards year-end thanks to a recovery in the US, the Eurozone, Japan, and China. This should help the manufacturing sector. However, with input prices rising and domestic conditions still weak, we think the recovery process in Viet Nam continues to be bumpy."

The HSBC Vietnam Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to 400 manufacturing companies. — VNS